NCCI released its annual State of the Line report this week. Worker’s Compensation insurance is performing at a preliminary 83% combined loss ratio in 2018 which is the lowest since the 1930s and the 4th consecutive year the combined loss ratios have been below 100%. It is the 7th consecutive year that the combined loss ratio went down from their peak in 2010. They typical 10 year cycle of peak combined loss ratios that the industry experience in the 1990s and early 2000s appears to have a longer wavelength now. Why are things looking so good for policy holders?
For one thing, look at the economy of 2018. Unemployment continues to decline and wages continue to rise. NCCI reported a 3.3% increase in wage rates and a 1.9% increase in employment for a net growth of 5.3% in payroll. The fastest growing employment sector is construction which typically have higher loss costs for premiums. That simply means more premium on the books – $48.6 Billion in 2018 which is an 8% growth over 2017.
On the loss side, NCCI indicates that there is a decrease of 1% of lost-time claims frequency per $1M in Standard Premium in 2018 from 2017. Not as big as a decrease in 2017 which was 4.6% from the prior year, but the 8th consecutive year in reduction of the frequency of lost time claims. Although the frequency of lost-time injuries has been declining since 2010, the medical costs affiliated with lost-time claims continues to increase.